Amid housing slowdown, Wu weighs tax breaks to jump-start construction

Politics admin May 31, 2026 0 Comments

Amid housing slowdown, Wu weighs tax breaks to jump-start construction

After years of negotiating with real estate developers about ways to spur sluggish housing construction in Boston, Mayor Michelle Wu is once again considering tax breaks to help get apartment buildings off the ground. But many developers say the effort is too little, too late.

The city is considering short-term tax abatements for projects that would be able to start construction in the next 18 months, according to threeBostondevelopers who have discussed tax breaks with the city andspoke on condition of anonymity.

While the discussions are preliminary and do not represent a formal shift in city policy, it’s a notable pivot from an administration that has prioritized affordable housing above other forms of development. Boston requires one-fifth of most new market-rate buildings to be set aside as affordable and has rarely subsidized such projects in the past.

The conversations follow a period of marked decline in new housing and construction citywide, even as rents continue to rise, and come as developers fear a successful rent control ballot question would effectively freeze new residential construction. Wu has said she would vote in support of the rent control question but favors the conditions set in her own, more modest, proposal, which languished at the Legislature after she filed it in early 2023.

That developmentslowdown is due in large part to high costs for both materials and construction financing, though some developers also point to more stringent rules that Wu implementedaround affordable housing and energy efficiency as driving costs upward. Reducing property taxes could help developers meet the investment return demanded by residential investors, such as pension funds and insurance companies.

Either way, the city counts more than 20,000 units that have been approved, but where construction has not yet started, and hopes to ease some of that backlog.

“With construction and borrowing costs reflecting interest rates that show no signs of abating soon, otherwise viable housing projects get stalled before groundbreaking,” said city spokesperson Marcela Dwork in an email. “Targeted, short-term tax abatements are one tool among many that the city has made available to help viable developments break ground and deliver much-needed housing for residents.”

The city declined to specify how many development teams have been offered possible tax abatement deals or estimate the number of units that could be built if those offers were successful. Developing housing in Boston can cost between $600,000 and $1 million per unit, if not more, depending on a project’s size and location.

Officials in the Boston Planning Department have for years worked one-on-one with developers in an attempt to get city-approved projects out of the permitting pipeline and into construction. This spring, the city provided $50 million from its $110 million Housing Accelerator Fund to help fund a 266-unit building at the Bunker Hill public housing community. The city and state are also jointly funding $10.5 million for 110 apartments in Roxbury’s Nubian Square.

In 2023, the Wu administration announced deep tax breaks for projects that would convert defunct offices into apartments, with developers eligible to reduce property taxes by up to 75 percent for as long as 29 years. While a handful of those projects have started construction, others have had a difficult time making financing work even with a tax break in hand. In June, three downtown office buildings that the city approved to convert into 95 apartments will hit the auction block.

Still, it has been years since the Wu administration weighed the idea of direct tax breaks for traditional market-rate housing. In fall 2023, Wu told business leaders she was “strongly considering” such a tax break alongside plans to revamp the city’s outdated zoning code. Developers eagerly awaited a formal announcement at Wu’s state of the city speech the following January, but her prepared remarks did not include any mention of a policy shift. Only after the speech, in conversation with reporters, did Wu make a surprise statement: The city was backing away from abatements amid feedback from developers that the breaks would not go far enough to make the economics work on a stalled project.

“We have spent a tremendous amount of time and energy really engaging with the real estate community, with academics, with just about every source of data, to understand the financials and what it would take to get our pipeline going,” Wu said then. “The scale of resources that it would take to close the gaps, to make these projects actually move forward — and at scale, to start to bring rents down — is simply not something that the city could afford.”

In the years since, the city’s budget has only gotten tighter; Boston Public Schools in Januarysaid it may need to cut as many as 400 positions. Wu has also proposed cuts to grant programs and department budgets, and the city recently forecast the lowest amount of revenue from new construction than at any point in the past decade.

Officials in the Planning Department have asked developers whether they could make various financial plans work, including a break on taxes during construction with a five- or 10-year abatement on real estate taxes after that. Those breaks would be available only if a project’s developer could commit to breaking ground relatively quickly — a tall order these days, developers say, with many investors holding off on committing any funding to Massachusetts projects ahead of the November vote on rent control.

While developers appreciate the renewed conversations, six industry sources told the Globe that a five- or 10-year tax break was too short a period to have a meaningful impact on a project’s finances.

“It’s too incremental to make much of a difference,” said one Boston developer who has spoken with the city about abatements. “This is revenue they don’t have today. And they haven’t got a chance of getting it, because these projects aren’t starting.”

Several pointed to Boston’s office-to-residential abatement program, which grants tax breaks that last nearly three decades, and a New York City tax exemption that extends as long as 40 years.

Still, developers said, it’s a positive sign that Wu is entertaining the idea of abatements for market-rate projects — even those with a 20 percent affordability requirement.

“It’s been a long process,” said another Boston developer who has spoken with the city about abatements. “It seems like there’s some movement in City Hall, but it’s snail’s progress.”